Ethiopian Institute of Financial Studies (EIFS) PROJECT FINANCE

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1 PROJECT FINANCE With the growth in the economy and the revival in the industrial sector coupled with the increasing role of private players in the field of infrastructure, more and more Ethiopian banks are entering into the project finance area. This training course will provide participants with the fundamentals of project financing; rationale for this type of financing; completion, operating, and risk analysis; and financing options. The course will cover cases of projects in developed economies as well as large scale infrastructure projects in developing countries. In this course, we will focus on the Project, its viability and it s financing. The course has the following key objectives: Help trainees to develop an appreciation of what is project finance and how it differs from conventional finance Familiarize participants with basic issues arising in financing projects Develop an understanding of the different issues involved in making project finance work Explore best practices in conducting financial, economic, and technical feasibility studies for bankable project finance transactions Examine key project finance structures Learn from real life project finance experiences Overview of project finance Traditional finance versus project finance Advantages and disadvantages of project finance Description of a typical project finance transaction & structure Participants of project financing Sources of project finance Legal ownership structure Project contractual structure Security arrangements Investment criteria Risk analysis Structuring the project contracts to allocate risk Estimating project cash flows Role and components of project evaluation Components of cash flow analysis and analysis of financial profiles from alternative points of view Opportunity cost of existing assets for cash flows Project finance: The lender s prospective Public private partnerships Recent trends in project finance and case study Commercial bankers, credit analysts Other interested professionals 1

2 FOREIGN TRADE FINANCE This training is designed for Ethiopian banking sector. The training focuses mainly on the modern instruments to finance export and import operations according to the international standards. Participants will obtain a good knowledge and good understanding of mechanism of documentary payments, incl. collections, letter of credits and bank guarantees. In addition, the participants will also get an insight into structured trade finance and commodity finance. After this course, the course participants will be able: To apply modern schemes to finance export and import operations, using international standard payment conditions To structure a finance scheme for a foreign trade operation To explain modern delivery and payments conditions Dynamics of foreign trade & mechanisms of trade The difference between local & foreign trade ICC Inco Terms 2000 Risks of import & export trade operations Methods of payments in international trade Advance payment, open account Documents used in foreign trade Documentary collections: Definitions and types of collections and payment procedures ICC (Uniform Rules for Collections) Bills acceptance procedures The documentary credits: the definition, meaning, concepts and credit cycle Different types of documentary credits used in Ethiopian banking practice and international best practices ICC UCP 600 (Uniform Customs & Practice 600) Shipping, insurance and payment documents used in documentary credits Short term finance in foreign trade: Ethiopian banking practice vs. international best practices Heads and employees of foreign trade finance departments in Ethiopian banks 2

3 Bank Accounting This is a general course on modern bank accounting principles and methodology based on International Financial and Reporting Standards. The course is designed to help bankers and bank accountants understand IFRS as applied to banks. Participants acquire theoretical knowledge about principles of preparation of international financial statements; and become familiar with the IAS / IFRS applicable to bank industry. The course has the following key learning objectives: Obtain general basic knowledge on international accounting standards Understand the qualitative characteristics financial statements prepared under IFRS Overview Financial accounting within banks The financial equilibrium : the balance sheet components Analysis of the profit and loss account components IASB: Tasks, organization and history What are Accounting standards? IFRS Framework for the preparation and presentation of financial statements IFRS Presentation of financial statements IFRS 1 First time adoption of IFRS IFRS based accounting and disclosures securities accounting IFRS based accounting and disclosures loans accounting Financial controllers Accountants & tax advisors 3

4 DOMESTIC BANKING PRACTICE This course is designed to provide a framework for understanding the role of banks in stimulating the national economy & equip participants with basic knowledge and skill on Domestic Banking Operations. In line with this, participants of the course will learn the nature and characteristics of all types of domestic bank products and related operational activities. Introduction to Money and Banking Saving & Fixed time Deposit Current Accounts Local Transfer Cheque Clearance and Credit Summary Front line staff engaged in domestic banking operations. 4

5 HOUSING FINANCE This course aims at providing training in mortgage lending according to international best practice, focusing on various types of mortgage products and underwriting techniques. The course looks at mortgage lending products designed according to the needs of target groups, their marketing, underwriting, servicing and monitoring. The course has the following key learning objectives: Designing mortgage lending products Learn the role and place of housing mortgage system in housing finance Understand the key characteristics and purposes of mortgage loan instruments Understand the models of housing lending and main participants in housing market Introduce key criteria, standards and practices in mortgage lending Learn mortgage lending instruments Evaluate loan repayment capability of the potential borrower Analyze credit risk Types of mortgage products and inherited risks Marketing of mortgage loans and customer screening Application, documentation and file building Assessment of creditworthiness of employed borrowers Appliance of credit risk mitigation tools: Property valuation report Credit bureau Property and life insurance Detailed financial analysis and underwriting for self employed and small entrepreneurs Loan monitoring and servicing Staff from credit and legal department 5

6 Ethiopian Institute of Financial Studies (EIFS) LEASING Generally leasing operations provide an efficient alternative for asset acquisition. In growing economies, the potential for leasing is immense and operating leases are a new phenomenon. Properly structured lease transactions could provide tax efficient, and quite often, off balance sheet funding means. As both financial and operating leases have become worth considering, this highly interactive and practical training program aims at introducing the participants to the areas of asset finance and leasing, with a comprehensive overview of leasing as a method of finance, covering finance and operating leases and other forms of asset finance as well as demonstrating the benefits of lease transactions for both the lessor and lessee. After this course, the participants will be able to: Understand and apply modern leasing instruments. Understand key issues such as funding, risk assessment, lease administration, asset management, defaults and problem cases. Overview of the leasing market - Introduction to leasing - Development of leasing - Significance for SMEs - Consumer leasing Leasing and Asset Finance Products - Finance leases - Hire purchase - Operating leases - Contract Hire - Add on services Understanding funding issues - Deposits - Equity - Loans - Commercial bond issue - Leverage loans - Securitization Interest rates and concept of time value of money Lease evaluation and structuring - Basics of lease evaluation - Structuring lease rentals - Residual values Credit and asset risk assessment - Financial statements - Ratio analysis - Asset risk assessment Accounting and tax considerations Legal and documentation Defaults and problem cases Pricing and structuring the operating leases Residual values Marketing leasing Bankers Financial Controllers Asset Managers Accountants & tax Advisors Lessors & Lessees Sales Personnel Equipment Vendors 6 half days 6

7 FUNDAMENTALS OF CREDIT APPRAISAL The learning goal of the credit appraisal is to understand the lending principles & techniques and to identify their advantages and limits. The tools and methods used will be analyzed in detail by the participants to verify their validity as a whole or to implement parts of these ideas in existing lending procedures. After this course, the participants will be able: To understand the general application of credit processing To conduct financial and non-financial analysis in relation to credit operations To understand the legal issues in credit processing 1. Credit Processing Introduction: Importance of Credit Credit products (incl. Medium Term Loans) Customer Relationship Management Collateral Report Writing 2. Financial Analysis Financial Statements Ratios Operating Performances Working Capital Management Cash flow Projection 3. Non-financial Analysis, Monitoring and control) Industrial Risk Assessment and Business Appraisal Management Skill and Competitive Advantage Identifying Problem Accounts Loan portfolio Management Basel II 4. Legal issues in Credit Contracts Security Business Organization Negotiable Instruments Middle managers and branch managers of a bank Loan officers Credit approval staff 7